In this interview, the first in a 6-part series, Rudi Kesic, Chief Executive Officer at Verify 365, discusses the challenges to combatting fraud in the post-Covid era and how digital onboarding and biometrics can help.
How have fraudulent activities evolved over the years and what kind of new trends are you seeing in the legal sector?
Ten years ago, fraudsters focused mostly on “skimming” credit cards and using them to withdraw money, but when chip and PIN cards were deployed they had to reinvent themselves. At the same time cryptocurrencies were emerging while dark web marketplaces were being established. All of this meant that fraudsters facilitated the move from payment fraud to identity fraud and data breaches, and the focus shifted to the legal and banking sectors.
“Today, fraudsters are able to target a greater number of people by infiltrating a single law firm, they can get easy access to the vulnerable lawyers with more finite precision, and they’ve come up with new ways to easily defraud legal practices and their clients through identity theft.”
In addition, concerns surrounding privacy and data protection are often at odds with the steps many law firms take to prevent fraud. Biometric technology, such as the kind provided by Verify 365, increasingly is helping firms to verify client’ identities, verify their address, confirm their source of funds, check PEPs and sanction lists, and provide an instant risk assessment of their clients. So, part of my job is to make sure we reinforce the importance of guaranteeing the ethical use of biometric data.
Today, dark web marketplaces and cryptocurrencies have accelerated the appearance of a more complex and resilient criminal supply combined with global money laundering chains. Highly skilled and specialised criminal groups can now collaborate without having to establish a direct relationship. Some will extract data, others will purchase it, and others will broker the deal – all behind the relative anonymity of cryptocurrency payments. In short, fraudsters have become better organised and realised the the vulnerable legal sector is an easy target.
My job is to ensure that Verify 365’s fraud prevention software is aligned with the specific requirements of the legal professional regulatory framework, such as the Solicitors Regulation Authority AML regulations, Enhanced Client Due Diligence procedures, HM Land Registry’s Safe Harbour Digital ID Standard, Lexcel accreditation, CQS quality mark, and so on, and ensure we understand the different ways fraudsters could target law firms and their clients.
How has fraud changed in the post-Covid era?
We have seen rapid and successive changes in attack vectors, from subscription fraud and account takeovers to PBX hacking against small and medium law firms. Covid-19 has prevented fraudsters from scamming free phones in-store using fake identities, so instead they target law firms by impersonating clients through other channels.
It is clear that fraudsters have now shifted their focus to law firms in the UK, US, Canada, Australia and the Middle East. They are exploiting the vulnerability of dated ID verification procedures within the legal system, especially in the real estate (conveyancing) sector. This shift to legal has led to an all-time high in identity theft cases in the UK, US, and Canada. It not only highlighted the need for more modern security measures within law firms, but also the need for stronger national identities, digital ones – allowing legal services to be provided remotely – and paired with biometric factors.
“Moving lawyers to a home-based working environment and the shift to remote working, especially in the UK, has also resulted in new risks including money laundering and identity fraud. At home, lawyers have less support and supervision which opens them to pressure from fraudsters. It is also difficult for law firms to enforce digital-AML client onboarding policies.”
These new risks are concerning because the economic consequences of the pandemic will continue to put financial pressure on law firms. Pressure paired with opportunity is a dangerous cocktail for money laundering and identity fraud. We saw it in 2008 after the global financial crisis, and we expect to see it again. This is why we are starting to discuss the best ways to implement digital onboarding solutions and biometrics at law firms and to assist them to identify fraudsters and authenticate genuine clients.
How can Verify 365 help law firms eliminate fraud and prevent money laundering?
Verify 365 technology is already helping law firms across the globe to fight fraud.
Verify 365 can use biometric information to tie hundreds of fraud cases to a single person or group. This helps tremendously with successful prosecutions. As a result, we are seeing an increase in prosecutions. Many law enforcement agencies around the world, including the FBI in the US, the Serious Fraud Office in the UK and the RCMP in Canada, are relying on the ID verifications undertaken by our technology.
So, we are starting to see more and more awareness and understanding of biometric onboarding technology and how it can be used in by law firms and conveyancers to eliminate fraud.
“When lawyers use technology that is trusted by law enforcement agencies and legal regulators such as HM Land Registry, it opens new opportunities to address threats as a global issue, not just an internal one.”
Lawmakers, regulation agencies and law enforcement bodies are starting to pay attention to identity theft and the damage it causes to society.
That awareness is positive for all and should help law firms implement better solutions for fighting fraud, identity theft and money laundering.